PayPal set to suspend domestic transactions in Argentina

As of October 9th, Argentine residents won’t be able to use PayPal to transfer funds between them. This is the announced result of a recent change to the company’s user agreement.

According to the amendment, to be enforced next month, “Argentina Resident PayPal Users may only send and receive international payments. Domestic payments between two Argentina Resident PayPal Users is unavailable.” It is important to note that this measure will affect both individuals and other entities that may be using the service, according to PayPal’s definition of a “user.”

While a PayPal spokesperson insists that “a vast majority of the customers [it serves] in Argentina will not be affected by this change,” many local users beg to disagree. As a matter of fact, it could have a negative impact on local e-commerce businesses that use PayPal for their transactions.

According to Workana‘s co-founder, Tomas O’Farrell, this news is “very worrisome.” While the TNW Latin America Startup Battle winner was ready to switch to another payment processor for its freelancer marketplace due to “bad experiences with PayPal,” he notes that this restriction “puts a huge dent on using it. For us, it would mean a very big problem,” he adds.

This isn’t only about changing providers; this restriction sends yet another negative signal on Argentina’s economic policy. As you may know, the government has been applying controversial restrictions to importations and foreign currency exchange.

Yet PayPal’s spokesperson denies any direct correlation, despite the fact that this change occurs shortly after the local tax authorities have tightened their controls on credit card purchases in a new attempt to ‘un-dollarize’ the country’s economy and avoid capital outflows. A couple days ago, Argentine users had already started to report difficulties in using the eBay-owned payment platform.

“While we are mindful of the changes to currency controls in the country, the reason we will no longer support local transactions in Argentina is because our product has not been adapted to properly support the local market,” PayPal told us.

“For example, we do not provide users the ability to transact in local currency or withdraw to local bank accounts. Therefore, we decided to limit our services to international payments for goods and services while we evaluate possible improvements to our product offering.”

Still, it remains difficult not to link this amendment with the fact that some Argentines were using PayPal as a workaround to aliment foreign bank accounts in dollars at a lower cost and with less traceability.

It is also a reminder of the uncertainty that currently reigns in Argentina, where official measures co-exist with unofficial bans on some imported electronics, such as the iPhone (see our previous story).

We are still awaiting PayPal’s comments on some points and will update this post if necessary.

Update: Here’s the comment we received from a PayPal spokesperson in answer to our question about recent reports on transaction issues:

“Upcoming changes to the PayPal User Agreement are not affecting payments at this time. Our call center is always available to talk to customers and answer their specific queries related to their PayPal accounts.”